Positive development for psychology as loophole closed in health insurance definition

As originally written in the proposed rule, the definition for medical necessity tied coverage to “illnesses” and “injury,” but not to physical and mental health conditions arising from other causes

By Government Relations staff

February 23, 2012—In a victory for mental health advocates, the Departments of Health and Human Services (HHS), Labor and Treasury have published a final rule that expands the definition of medical necessity as requested by the American Psychological Association (APA) and 43 other members of the Mental Health Liaison Group (MHLG).

The Patient Protection and Affordable Care Act (ACA) requires that the departments develop standards for use by group health plans and health insurance issuers offering group or individual health insurance coverage in compiling and providing a summary of benefits and coverage (SBC) that accurately describes the benefits and coverage under the applicable plan or coverage. ACA also requires the departments to develop standards for the definition of terms used in health insurance coverage.

As originally written in the proposed rule, the definition for medical necessity tied coverage to “illnesses” and “injury,” but not to physical and mental health conditions arising from causes unrelated to either illness or injury, such as those present from birth:

Medically Necessary
Health care services or supplies needed to prevent, diagnose or treat an illness, injury, disease or its symptoms and that meet accepted standards of medicine.

The distinction provided a loophole that could be exploited by insurance carriers who did not want to cover treatment. The coalition’s letter protested the fact that insurers could thus unfairly exclude some mental health and substance user disorder conditions that are expected to be covered under ACA’s Essential Health Benefits package.

The APA Practice Organization authored the October 21 letter (PDF, 16KB) from the MHLG, which recommended that the definition of medical necessity be amended to add the word “condition.” The MHLG also requested, and did not gain, replacement of the word “medicine” with “clinical practice.”

The MHLG is the leading mental health advocacy coalition in Washington, DC. “Over the years we’ve learned that if regulations aren’t clear, some insurers will attempt to evade the spirit of the law, “ said APA Executive Director for Professional Practice Katherine C. Nordal, PhD. “The issue that we identified last fall could have had the result of excluding many people with disabilities from the benefits in their health plan.”

The decision will affect all health plans, reaching approximately 160 million Americans in employer-provided group health plans. The rule goes into effect September 2012 for plan years that begin on or after September 1.